Text|New Consumption Finance Research Society
From foreign milk powder to Chinese milk powder, Mead Johnson has been acquired by Primavera Capital for more than two years. In addition to actively preparing for the new national standard, how to adapt to and seize the Chinese market as soon as possible and promote the localization strategy has also become an important issue for Mead Johnson to consider.
Recently, Mead Johnson China issued an internal letter announcing the upgrade of its management structure and further clarifying its future development plans. It is worth noting that the board of directors of Mead Johnson China has appointed Xiao Jingjing, managing director of Primavera Capital, as CEO, and Zhu Dingping will resign as president for personal reasons, but will still serve as a senior advisor to the company.
The New Consumption Finance Research Agency learned that Xiao Jingjing was the participant and leader of Primavera Capital's acquisition of Mead Johnson China in 2021, and has been responsible for Mead Johnson China's follow-up post-investment services since then.
When the halo of "foreign milk powder" is no longer there, can Mead Johnson, who has changed its leadership again, stand out in the Chinese market?
The new CEO has a lot of background and has a close relationship with Junlebao
Xiao Jingjing, the new "new handsome" of Mead Johnson in China, who has just taken office, has a lot of background.
According to the official website of Primavera Capital, Xiao Jingjing graduated from Yale University with a bachelor's degree, and worked in the International Cooperation Bureau of China Development Bank and the Hong Kong Investment Banking Department of Goldman Sachs Group before joining Primavera Capital. Prior to that, he was the Managing Director and Co-Head of the Consumer Industry Group at Primavera Capital, and has extensive investment experience in both the healthcare and consumer industries.
From the perspective of past resume, Xiao Jingjing not only led the acquisition of Primavera Capital's acquisition of Mead Johnson China, but also participated in the investment of Zhaopin, Junlebao Dairy, iSoftStone, ByteDance, and the cross-border acquisition of Iovate Health Sciences by Xiwang Food.
Screenshot of the official website. It is understood that in the upgraded management structure, Mead Johnson China decided to establish an executive committee, which includes CEO Xiao Jingjing, chairman and chairman of the executive committee Christian Nothhaft, general manager of omni-channel sales in Chinese mainland, Pankaj Agarwal, general manager of cross-border business and Hong Kong and Taiwan, and chief officer Harold Diender.
According to the internal letter, the company established an executive committee to further enhance the forward-looking and efficient nature of the company's strategy and major decisions, and to respond to the rapidly changing market environment. It is understood that the members of the executive committee have rich industry experience and have made profound achievements in the fields of consumer goods retailing and digital transformation.
It is worth noting that in the dairy industry, Primavera Capital has also joined hands with Ping An Capital and Junqian Co., Ltd. to complete the acquisition of 51% of Junlebao's equity at a transaction consideration of 4 billion yuan. And Xiao Jingjing herself also served as a director of Junlebao Dairy.
Based on the connection between the two, as early as 2021, when Primavera Capital acquired Mead Johnson China, there was speculation in the industry whether Primavera Capital would integrate Junlebao and Mead Johnson China. And this personnel change has further exacerbated the possibility of this speculation.
Song Liang, a dairy expert, believes that there may be three ways to integrate the two brands. "The first way is to exchange shares with Mead Johnson China before Junlebao goes public. The second way may be that the two parties and the capital jointly package, that is, Mead Johnson China, Junlebao and the capital behind Junlebao are packaged, and then listed in a unified manner. The third is that after Junlebao goes public, it will fully acquire Mead Johnson. ”
However, Xiao Jingjing made it clear in an interview with Caijing magazine that Primavera Capital will maintain the independence and integrity of Mead Johnson's Chinese brand, and at the same time cooperate with Reckitt Benckiser in innovative research and development, food safety, chain and team building. Mead Johnson China's cooperation with any other company is premised on maintaining the independent development of its own brand.
Mead Johnson China's move to change its commander again has also sparked heated discussions in the industry.
After Mead Johnson was taken over by Primavera Capital, Wang Dingmian, the former executive director of the China Dairy Association, once admitted that the reason for Mead Johnson's "decline" was the excessive loss of its internal management and the original middle and senior personnel, the lack of business owners to boost morale, and its marketing concepts and methods have remained unchanged for many years and are too old.
What's more, Mead Johnson's "baton" is a layman who doesn't know much about the milk powder market. Therefore, in the eyes of industry insiders, Primavera Capital is expected to find a way out in 3-4 years after taking over.
Xiao Jingjing, who has an investment background, also lacks management experience in milk powder enterprises, and it remains to be seen whether she can lead Mead Johnson Zhensheng to achieve the development goal of localization in China.
Twice in two years, Mead Johnson's progress in Chinese localization has become a "mystery"?
In fact, before Reckitt Benckiser was acquired, Mead Johnson had been "in decline" for many years, not only with stagnant revenue, but also with a declining net profit year after year. At that time, Mead Johnson's revenue was between 5 billion and 6 billion, and its net profit fell by 9% in 2015 and 16% in 20166%。
However, Mead Johnson also has a very glorious development history, after entering China in 1993, it became the first international brand of infant formula to operate locally and independently, and has been the leading infant formula in China for many years. In 2013, Mead Johnson achieved nearly 7 billion revenue in China, with a market share of 143%, winning the championship in one fell swoop.
However, Mead Johnson was once caught in a "bribery scandal", which also exposed its marketing methods in the Chinese market at that time.
In July 2015, the U.S. Securities and Exchange Commission (SEC) published an investigation document alleging that Mead Johnson Nutrition CoViolation of the U.S. Foreign Corrupt Practices Act (FCPA). The allegation alleges that employees of Mead Johnson's Chinese subsidiary bribed medical staff at Chinese public hospitals to get them to recommend the company's infant formula and to obtain contact information for newborn mothers and expectant mothers for marketing purposes.
According to the SEC, in the five years from 2008 to 2013, Mead Johnson's subsidiaries improperly paid about $2.07 million to medical staff in China's public hospitals, making profits of about $7.77 million. The profits were recovered by the SEC, and the company was fined $3 million and $1.26 million in prejudgment interest, totaling $12.03 million.
Mead Johnson neither admitted nor denied the allegations, but chose to settle the charges by paying the SEC about $12 million, including illegal gains and fines.
In the years since this turmoil, the pattern of China's infant formula market has changed dramatically. Domestic milk powder brands such as Feihe and Yili have gradually risen, while the market share of imported milk powder has begun to decline off a cliff.
According to Euromonitor, the market share of domestic milk powder has reached 60% in 2021, and among the top ten infant formula brands in China, the market share of domestic brands has reached 453%, the top three brands are Feihe, Nestle, and Danone, with a market share of 437%, Mead Johnson fell from the top three to the fifth place in the rankings.
In the end, Mead Johnson decided to follow the local customs, break away from the label of "foreign milk powder", and completely become a Chinese localized milk powder.
On September 9, 2021, Primavera Capital acquired a 92% stake in Reckitt Benckiser's Mead Johnson Greater China business for US$2.2 billion (14.2 billion yuan), achieving full control, and appointing Zhu Dingping as the president of Mead Johnson's China Business Group.
Zhu Dingping has rich experience in the field of infant nutrition, so the industry has high expectations for him. It is reported that as soon as Zhu Dingping took office, he proposed the "three chains" strategy of strengthening the "value chain", improving the "digital chain" and shortening the "decision-making chain", in an attempt to carry out a thorough localization transformation of Mead Johnson.
However, now that Mead Johnson has been localized for more than two years, it has still not released detailed financial data, and whether there is a turnaround in localized operations has become a big mystery. Regarding Mead Johnson China's move to change the coach twice in two years, some industry insiders speculate that it may be related to Zhu Dingping's performance and performance during his tenure.
In August last year, Zhu Dingping disclosed Mead Johnson's performance in China for the first time at a press conference, but the specific data was vague and did not have much reference value.
Zhu Dingping said that Mead Johnson China's core business indicators such as operating income, cash flow, and customer acquisition capabilities have returned to positive growth. In the first half of 2022, Mead Johnson China's operating revenue increased by more than 20% quarter-on-quarter, profit exceeded expectations by nearly 3%, the average monthly new customers increased by 30% month-on-month, and the number of dealer inventory turnover days was 17 days.
In addition to its vague performance, Mead Johnson China has also frequently stepped on the "red line" of quality, which is not common among well-known milk powder brands.
On April 2, 2022, Mead Johnson Nutrition (China)** was fined 129440,000, the confiscated amount is about 60290 thousand. The reason for the punishment shows that the platinum infant formula (0-6 months old, 1 section) imported and distributed by Mead Johnson exceeded the standard of ethylvanillin during the sampling inspection, and the re-inspection was still unqualified.
On February 20 this year, Reckitt recalled Mead Johnson infant formula suspected of being cross-contaminated with Cronobacter. Although the product was not sold to the Chinese market after customs verification, and it was not found that the product involved was imported through cross-border e-commerce channels, it still sounded the alarm for imported milk powder.
On the Black Cat complaint platform, there are more than 580 complaints about Mead Johnson, and some consumers have complained that Mead Johnson's products involve false advertising, and even unknown foreign objects such as bugs and hair appear in milk powder.
Now, it seems that Mead Johnson's localization development in China has not ushered in much improvement. Some milk powder distributors revealed that for a long time, Mead Johnson Lanzhen's terminal market has not improved, and the terminal sales growth of its goat milk powder Mecca Gaote is weak, and the offline channels of student milk powder Xueyouli are also rare.
In the future, it remains to be seen whether the new coach Xiao Jingjing can lead Mead Johnson China to break through the bottleneck of development.